OECD Journal: Journal of Business Cycle Measurement and Analysis

Frequency
Semiannual
ISSN: 
1995-2899 (online)
ISSN: 
1995-2880 (print)
http://dx.doi.org/10.1787/19952899
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The Journal of Business Cycle Measurement and Analysis has been discontinued as of 24 June 2016. This journal was published jointly with CIRET from 2004 to 2015. For more information see www.ciret.org/jbcy.

Article
 

Aggregate Comovements, Anticipation, and Business Cycles You do not have access to this content

English
 
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    http://oecd.metastore.ingenta.com/content/3311011ec005.pdf
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Author(s):
David R. F. Love
18 May 2011
Pages:
18
Bibliographic information
No.:
5,
Volume:
2011,
Issue:
1
Pages:
93–110
http://dx.doi.org/10.1787/jbcma-2011-5kgg5k4plkzs

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This paper shows that negative comovements between major macroeconomic variables at business-cycle frequencies are commonly observed, but that standard Real Business Cycle (RBC) theory fails to predict this feature of the data. We show that allowing for "anticipation effects" in response to "news shocks" enables standard RBC models to predict both the observed patterns of negative comovement and overall positive correlations. Anticipation also improves magnification of shocks in the model without harming predictions for the other second moments central to RBC studies. Anticipation effects improve on standard RBC frameworks by offering an empirically plausible explanation for the nontrivial fraction of time that aggregate variables are observed to comove negatively.
 
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